- Aerosmith announced they retired from touring and canceled the remainder of dates on their farewell tour
- Paul Bassman, an insurance expert, explains what happens to all the money at stake
- Insurance will typically cover 80% of the guaranteed fee
On Aug. 2, Aerosmith made a heartbreaking decision to retire from touring nearly one year after Steven Tyler fractured his larynx during a September 2023 show.
The band, which had only made it to their third stop and postponed their farewell tour several times since, announced the news in a lengthy statement on Instagram.
“As you know, Steven’s voice is an instrument like no other. He has spent months tirelessly working on getting his voice to where it was before his injury. We’ve seen him struggling despite having the best medical team by his side. Sadly, it is clear, that a full recovery from his vocal injury is not possible,” the statement read, in part.
When a tour, especially of this caliber, is canceled, there’s more logistics to be dealt with than an automatic ticket refund for fans. Oftentimes, artists and their teams will purchase cancellation policies ahead of their tours to protect the artist from financial burden should it be canceled.
Paul Bassman, managing director at Higginbotham Insurance, answered all of PEOPLE’s burning questions and broke down what goes down under these circumstances.
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Since Aerosmith’s tour was canceled for medical reasons, is that covered by insurance?
Generally speaking, when an artist gets tour cancellation insurance, there will be exclusions for pre-existing conditions on that policy. So if for example, the artist has a heart condition that’s been diagnosed, there’ll be exclusion for any heart problems, unless of course the artist is being treated by a doctor and the doctor assures that the medication that that artist is being provided or the treatment that the artist is undergoing will alleviate that condition. Since Steven Tyler canceled prior tours due to throat conditions, this tour cancellation is unlikely to be covered by insurance. If however he had a long term disability policy prior to the initial tour canceling, he could have coverage there.
How detailed are these policies when it comes to medical conditions?
It would outline clearly which conditions are excluded. The artists typically require a medical exam prior, especially the big tours. Sometimes the smaller ones, don’t require medicals because it’s too unwieldy to require that. But once the artists get large enough, they’ll have to go to a doctor, the doctor has to fill out a medical questionnaire, they have to disclose any sort of medications they’re taking, what sort of pre-existing conditions they have. Then the underwriters for the tour take that into consideration and go, we’re going to not cover this, or we’re going to not cover that, or we’ll decide to cover that because he’s taking XYZ medication.
Who is responsible for refunding the tickets?
Live Nation would have likely paid in advance to Aerosmith, and the terms and conditions of that advance would be you have to fulfill your obligations for the tour in order to keep that money. So the money may have to be clawed back from Aerosmith, but initially Live Nation and Ticketmaster would be the entities refunding the money to the patrons.
Is Aerosmith losing money because of this decision?
Aerosmith would lose the money that they were going to get in guarantees, but they wouldn’t get paid because they didn’t fulfill their obligations under the tour agreement. It’s a possibility that maybe Aerosmith or Steven Tyler took out a disability policy that would cover catastrophic illness or injury. Sometimes tour cancellation insurance can be quite expensive, so what the artists can do is they’ll get a disability policy that says if your injury or illness caused you to not be able to do your job or do what you do for six months or sometimes a year… then the policy will pay out the face value.
The barrier for disability policy payoff is pretty much career ending or just shy of. You have to be physically unable to tour for six months or a year because of that illness or injury, and this injury to Steven Tyler would qualify for that… but I would say challenging to procure the insurance and perhaps very expensive.
[Aerosmith] will still be out expenses for their crew, and who knows what kind of contracts they sign with their bus companies and their trucking companies, whether they have to pay the whole thing or there’s a, “Hey, we canceled the tour, we’ll pay you 50%.” Every contract has different provisions on what happens if. They would still get paid what they made, for the shows they performed.
How does is each venue booked handled after a tour is canceled?
Sometimes the venues will have a minimum guarantee, they call it a House Nut, that is, ‘OK, you have to pay this amount in order to secure the venue and that’s non-refundable.’ So the venues may have some safety in that regard. Live Nation, sometimes have their own cancellation policy for their expenses or the potential expenses. That’s also possible. The venue can always rebook somebody else. If it’s very close to the date, they may have a clause in their contract saying that we’re going to keep the deposit that you put on for the venue.
How much of the tour is covered by insurance?
The amount covered by a tour cancellation policy is based on a percentage of guarantees that the promoter is contractually obligated to pay the artist. I typically see this figure at 80%, however it can be as high as 85% of the guarantees depending on the artist and deal. The reason you can’t insure 100% of guarantees is the insurers know that in the event of a tour canceling, there will be some level of cost savings by striking expenses such as crew, transportation, rented equipment and so forth. Ideally the artist wants this figure to be on an agreed value basis (known at Lloyds of London as “to pay”) which will automatically pay the artist if the show cancels for a covered cause of loss.
Can you provide an example?
Aerosmith for an example, let’s say for round numbers, the guarantee from Live Nation is one million a show, over 20 shows, that’s a $20 million contract that they have with Live Nation and they can assure 80% of it. If they cancel for a covered reason, then they get a check based on the number of shows lost. It’s a very simple process of getting paid on cancellation insurance because once it’s determined that it’s a covered cause of loss, then the amount is already agreed prior.
Does the artist ever not get insurance?
It happens all the time. People think they’re invincible. People think, “Oh, we’ll never cancel. The show must go on. We’ll get a new guitar player.” Whatever it may be. Nine times out of 10, you’re going to come out ahead. Most of the time it’s just that one time you don’t, it’s painful.
